Factores de riesgo que comprometen la formalización en explotaciones

Key financial figures

2008 2007 2006

Operating profit (loss) EUR ‘000 (4 296) 2 332 (34 609)

Return on equity 1,6 % -6,3 % -5340,6 %

Equity-to-assets ratio 49% 90,0 % -2,0 %

Net interest-bearing debt EUR ‘000 285 467 (152 036) 8 667

Debt-to-equity ratio 67,3 % -48,3 % N/A

Capital expenditure EUR ‘000 429 086 134 139 6 686 Research & development expenditure EUR ‘000 181 734 1 361 Property, plant and equipment EUR ‘000 552 458 129 718 3 960 Derivative financial instruments EUR ‘000 152 545 10 610 0

Borrowings EUR ‘000 368 179 1 430 38 028

Cash and cash equivalents at the end of the year1 EUR ‘000 82 713 153 466 29 361

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Base metals markets suffering from global economic downturn and lack of demand

While the early months of 2008 still saw nickel prices at reasonably good levels in the long term perspective, the latter half of the year witnessed a drastic drop in prices as well as demand. Starting from a high of USD 33,185 per metric tonne (USD 15.1/lb) in early March, the London Metals Exchange (“LME”) nickel cash price declined to an all-year low of USD 8,810/tonne (USD 4.0/lb) in October and recovered slightly to above USD 11,000/tonne (USD 5.0/lb) by the end of the year. In the meantime, the nickel stock levels at LME rose from slightly more than 43,000 tonnes in July to almost 79,000 tonnes at the end of year, reflecting a dramatic drop in demand stemming from the global financial crisis and continued destocking in the steel industry.

The global nickel mining industry reacted to the market development by announcing significant production cuts amounting to some 427,000 tonnes in 2009. This represents more than 28% of the previously anticipated production level for

the year and is expected to bring the market closer to supply/demand balance for the time being.

The poor demand and price development has continued into the first months of 2009 with the LME nickel cash price at approximately USD 10,000/tonne (USD 4.5/lb) and stock level at above 98,000 tonnes in late February. Although no sudden improvement in the market environment is expected in the near term, the economic stimulus packages issued by numerous governments combined with the reduced supply are expected to moderately improve the market situation going into 2010. The other metals of relevance to Talvivaara - zinc, cobalt and copper - also suffered from the market conditions. The zinc price averaged at approximately USD 1,880/tonne (USD 0.85/lb) for 2008 with the all-year low at USD 1,040/tonne (USD 0.47/lb) in early December and all-year high at USD 2,800/tonne (USD 1.27/lb) in early March. Cobalt prices dropped from the high of USD 52.5/lb in March to USD 12.5/lb in early December and have continued to decline in the early part of 2009. The copper

Share-related key figures 2008 2007 2006

Earnings per share EUR 0,03 (0,06) (0,41)

Equity per share EUR 1,74 1,76 (0,01)

Development of share price

Average trading price2 EUR 3,64 3,84 -

GBP 2,90 2,65 -

Lowest trading price2 EUR 1,22 2,96 -

GBP 0,98 2,05 -

Highest trading price2 EUR 5,64 4,53 -

GBP 4,49 3,13 -

Trading price at the end of the year3 EUR 1,25 4,09 -

GBP 1,19 3,00 -

Change during the year -60,3 % 20,0 % -

Market capitalization at the end of the year4 EUR ‘000 278 475 911 829 -

GBP ‘000 265 247 668 690 -

Development in trading volume

Trading volume 1000 shares 84 780 26 783 -

In relation to weighted average number of shares 38,0 % 15,9 % - Adjusted average number of shares 222 896 718 168 213 011 89 139 109 Fully diluted average number of shares 223 045 994 168 334 869 201 371 929 Number of shares at the end of the year 222 896 718 222 896 718 89 833 030

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Trading price is calculated on the average of EUR/GBP exchange rates published by the European Central Bank during the financial year

3)

Trading price is calculated on the EUR/GBP exchange rate published by the European Central Bank at the end of the financial year

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cash price varied between USD 8,980/tonne in July and USD 2,770/tonne at the year-end. In early 2009, the price has recovered slightly, staying above USD 3,100/tonne.

Overall, the market environment has not affected Talvivaara’s production plans for 2009 or beyond. In the long term, the Company expects its operations to be profitable at current price levels. However, the first months of production in 2009 will be cash flow negative due to higher than average unit cost of production during ramp-up. This is primarily related to the production process involving bioheapleaching, in which mining and materials handling costs during ramp-up are essentially the same as in full-scale production, but revenues from metal sulphides only grow gradually as increasing amounts of leach solution are obtained from the growing heap.

Financial review

As the production of metal sulphides at the Talvivaara mine did not yet reach a commercially significant level before the year end, the Company had no revenues during the year ended 31 December 2008 (2007: EUR 0). The Company’s other operating income, amounting in total to EUR 29.8 million (2007: EUR 13.6 million), consisted mainly of net realised gains on available-for- sale financial assets and currency option contracts, and of fair value gains in nickel and zinc forward swap contracts. The Company’s operating loss amounted to EUR (4.3) million (2007: operating profit of EUR 2.3 million). The inventories and expenses increased substantially compared to the previous period as a result of the commencement of production activities during the year. Employee benefit expenses including the value of employee services in the employee share option scheme were EUR (8.9) million (2007: EUR (4.0) million), with the increase attributable to increased number of personnel. Depreciation amounted to EUR (5.8) million (2007: EUR (0.8) million), reflecting the start of depreciation of a substantial part of the mine assets in November 2008.

The profit for the year amounted to EUR 5.8 million (2007: EUR (9.9) million). The finance income of EUR 9.2 million (2007: EUR 4.3 million) was mainly related to interest income on deposits and exchange rate gains, whereas the finance cost of EUR (13.0) million (2007: EUR (11.5) million) was largely caused by exchange rate losses and expenses related to the Project Term Loan, the senior unsecured convertible bonds due 2013 and a term loan for the railroad construction. Income tax expense was EUR 13.9 million (2007: EUR (5.0) million), reflecting recognition of deferred tax assets on the grounds that commercial

production at Talvivaara had commenced and that future taxable profits were considered probable.

On the balance sheet as at 31 December 2008, the Company’s current assets amounted to EUR 179.9 million (2007: 165.6 million) and the non-current assets to EUR 694.0 million (2007: EUR 184.5 million), bringing the total assets to EUR 874.0 million (2007: EUR 350.0 million). Property, plant and equipment totalled EUR 552.5 million (2007: EUR 129.7 million), with the increase over the previous year reflecting the high capital expenditure in

2008. This expenditure included primarily costs incurred as a result of the construction of the Talvivaara mine (EUR 346.8 million) and the Talvivaara-Murtomäki railroad (EUR 29.6 million), expenditure related to limestone handling equipment which was not within the scope of the mine construction plan as described in the Company’s Bankable Feasibility Study of March 2007 (EUR 19.5 million), and certain production equipment which have subsequently been covered by leasing arrangements (EUR 32.4 million). The expenditure related to mine construction was moderately higher than anticipated due to cost escalation in some earth works contracts and certain late stage design changes in the metals recovery plant.

Other notable changes in the Company’s assets include a substantial increase in the fair value of derivative financial instruments, in particular nickel and zinc forward swaps, the non-current portion of which amounted to EUR 116.0 million (2007: EUR 9.8 million) and current portion to EUR 40.8 million (2007: EUR 0.8 million).

Talvivaara’s total equity was EUR 423.9 million (2007: EUR 315.0 million). The Company has applied hedge accounting to a substantial part of its nickel forward swap contracts, and therefore recognised the effective portion of the changes in fair value of cash flow hedges, amounting to EUR 72.3 million net of tax (2007: 0), directly in equity.

Total liabilities amounted to EUR 450.1 million (2007: EUR 35.0 million) with total borrowings representing the largest part of the liabilities at EUR 368.2 million (2007: EUR 1.4 million). The increase in the borrowings resulted largely from the offering of EUR 84.9 million of senior unsecured convertible bonds due 2013, the utilisation of the Project Term Loan amounting to EUR 229.9 million, and partial draw down of a railroad term loan facility to the amount of EUR 25.7 million. The equity component of the convertible bonds of EUR 10.9 million is included in the Company’s total equity.

The net cash used in operating activities was EUR (18.8) million (2007: EUR (27.6) million) and net cash used in investing activities EUR (401.8) million (2007: EUR (133.1) million). As net cash generated in financing activities was EUR 376.7 million (2007: EUR 285.4 million), the net decrease in cash and bank overdrafts amounted to EUR (43.8) million (2007: EUR 124.7 million). Cash and bank overdrafts at the end of the year totalled EUR 82.7 million (2007: EUR 153.5 million).

Financing

In May 2008 the Company completed an offering of €84.9 million of senior unsecured convertible bonds due 2013. The bonds are convertible into 11.5 million fully paid ordinary shares of the Company. Talvivaara shall repay the debt in one instalment on maturity date 20 May 2013 to the extent the bonds have not been converted into shares. The conversion right may be exercised at the option of the bond holder from 30 June 2008 until the the sixth day prior to the maturity date. The bonds carry a coupon of 5.25% per annum, payable semi-annually in arrears.

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The initial conversion price is GBP 5.886, which represents a 38% premium above the reference share price of GBP 4.265. The GBP/EUR exchange rate used to determine the euro denominated proceeds was 1.255.

The USD 320 million (EUR 230 million) Project Term Loan was fully drawn between September and November 2008. The loan carries an interest rate of LIBOR + 2.75% prior to, and LIBOR + 2.00% after, economic completion, which the Company anticipates to take place in 2010. Repayments of the loan are scheduled to start in June 2010 and to extend into 2016. Certain information covenants, financial ratio covenants and other covenants customary to project finance facilities apply to the loan. As at 31 December 2008, Talvivaara was in compliance with the agreed covenants.

As required under the Project Term Loan Facility Agreement, Talvivaara has hedged nickel and zinc through forward swap contracts over the period of April 2009 through December 2011. The amount of nickel hedged is 15,961 tonnes at the weighted average price of USD 23,611 per tonne. For zinc, the

corresponding figures are 38,017 tonnes at the average price of USD 1,949 per tonne.

In October 2008, Talvivaara Infrastructure Oy entered into a EUR 45 million term loan facility agreement to finance the construction of a 25 km railhead from Murtomäki to the Talvivaara mine. As at 31 December 2008, Talvivaara Infrastructure Oy had drawn down EUR 25.7 million of the loan.

Subject to agreed criteria for minimum transportation volumes on the railroad being fulfilled, the Finnish State will reimburse the construction expenses to Talvivaara Infrastructure Oy up to an amount of EUR 48.8 million (including 22% VAT) in two instalments in 2010 and 2011. Talvivaara Infrastructure Oy intends to apply this reimbursement towards repayment of the railroad term loan. As a result of the reimbursement, the railroad will become property of the Finnish State and a part of the national rail network.

In August 2008, Talvivaara entered into a financing arrangement, whereby certain production equipment will be leased by HSH Nordic Finance Talvivaara Ab (“Special Purpose Entity”) to Talvivaara Project Ltd upon full acceptance of the equipment by Talvivaara Project Ltd. The lease term is anticipated to

commence during the first half of 2009. The Special Purpose Entity has drawn down a EUR 32 million loan to finance the equipment and has used the loan amount to reimburse the acquisition cost of the equipment to Talvivaara Project Ltd. Construction project nearing completion,

production ramp-up ongoing

Construction of the mine, which had started in April 2007, continued throughout 2008 with focus in the early part of the year on preparations for mining, materials handling and bioheapleaching operations, and in the latter half of the year on completion of the metals recovery plant. The project proceeded

on time all through, allowing the mining operations to start on 1 April and the crushing, stacking and bioheapleaching to commence sequentially during the month of July. First metal sulphides were precipitated from the leach solution on 1 October, as planned.

Total mining during the year amounted to 3.9 million tonnes, of which 2.5 million tonnes was ore. The capacity of the mining department ramped up as planned and exceeded demand, which was curtailed by the limited crushing capacity stemming from system design problems in the secondary and tertiary crushing circuit.

The problems in the crushing circuit emerged early on in the ramp-up process, leading to numerous modifications and amendments being made to the system during the last quarter of 2008. By the end of the year a more satisfactory capacity had been reached, but by then the amount of crushed ore on the heap pad had fallen short of the budgeted levels to such an extent that Talvivaara was forced to reduce its production target for 2009 to 15,000-18,000 tonnes of nickel.

While the first metal sulphides from leach solution were successfully produced in October, the amount of leach solution available for metals precipitation remained too small for commercially significant production during the remainder of the year due to the smaller than budgeted amount of ore under leaching at the time. The metals recovery plant was however tested according to plan during the last months of the year to secure its operability for commercial grade and scale production in early 2009.

The bioheapleaching process performed as expected and in line with the pilot study results. The heap temperatures quickly reached levels of 90°C or more, while leach solution temperatures rose to above 50°C. The strong thermal reactions, along with the actual metal contents and bacterial counts detected from the leach solutions, gave a strong indication of the process being active and performing well. The prime challenge with the process in its first few months of operation was excess water in the circulation, which resulted from heavy rains during the autumn and the drainage pipes also from the unfilled parts of the heap pad draining waters into the collection ponds. This problem has since diminished, as a larger and larger proportion of the heap pad is covered by the growing heap, and as the amount of water flowing into the system from the surrounding areas has been substantially reduced as a result of freezing temperatures during the winter months.

While the ramp-up of production continues through 2009, the construction project is nearing its completion to the extent necessary for the planned production levels in 2009 and 2010. Capital expenditure, which is only required to achieve planned production levels in 2011 and beyond, has been deferred until 2010.

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Construction of the 25 km Talvivaara-Murtomäki rail connection started in February 2008. The main contractor for the project is the state-owned company VR-Track Ltd. The railroad

construction has progressed on schedule and within the original budget of EUR 40 million and the railhead is scheduled to be operational in August 2009.

The improvement works and partial re-routing of the regional road number 870 bypassing the mine area on its eastern side and the local road number 8714 crossing the mine area in the east-to-west direction have been largely completed during 2008. The pipeline for the in-take of the process water from Lake Kolmisoppi was commissioned on time and has been operational since July 2008.

The Talvivaara mine was connected to the Finnish national main grid in January 2008 through a 110 kV power line constructed from the Vuolijoki substation to the mine.

Significant increase in mineral resource

In December 2008, Talvivaara announced a 42% increase to 642 million tonnes in Measured and Indicated Mineral Resources, as defined by the JORC code, and a 76% increase to 1,004 million tonnes in Measured, Indicated and Inferred Resources, as defined by the JORC code, in the Kuusilampi and Kolmisoppi deposits. The increased resources contain approximately 2.2 million tonnes (up from 1.3 million tonnes) of nickel metal and 5.0 million tonnes (up from 2.9 million tonnes) of zinc metal, further reaffirming Talvivaara’s position as one of the top nickel mines globally and an internationally significant zinc producer. The resource increase resulted from a drilling campaign focused on ore boundary definition up to 300 metres north of the previously known boundaries of the Kuusilampi orebody. The Kuusilampi mineral resource now totals 505 million tonnes in Measured and Indicated Categories and 826 million tonnes with Inferred Resource included. The Kuusilampi orebody is still open at north, east, south, and at depth.

Mineral resources at the Kolmisoppi deposit remain at their previous levels, as the drilling campaign only covered the Kuusilampi deposit for mine and support area planning. As a result of the increase in mineral resources, Talvivaara will re- evaluate its options for production expansion. Previous studies based on the mineral resource increase announced in December 2007 had indicated a production expansion to be permittable, and economically and technically feasible.

Research and development

The joint feasibility study on manganese extraction from the Talvivaara ore continued with Outokumpu Oyj in accordance with the cooperation agreement signed on 22 June 2008. The feasibility study encompasses an evaluation of the technical and

commercial feasibility of employing electrowinning technology for the extraction of manganese metal and manganese oxide from the leach solution generated from Talvivaara’s bioheapleaching process.

Recent research by the Company has produced encouraging results on the electrolytic recovery of high-purity manganese metal and manganese oxide from the leach solution. The latest finding is that manganese sulphate, which is used e.g. in batteries, can also be produced.

The ore at the Talvivaara deposits has a manganese content of approximately 0.3%, which should enable annual production of more than 30,000 tonnes of manganese, according to the Company’s present production plan. In the bioheapleaching process, recovery of manganese has been found to be comparable to that of nickel and zinc.

Any decisions on potential investment in commercial scale manganese production have been deferred due to the presently unpredictable base metals markets and the globally difficult financing environment.

In addition to the manganese studies, Talvivaara has continued active development and optimisation of the bioheapleaching technology, and studies related to chemical and biological iron removal from the leach solution and utilisation of gypsum residue. Many of the studies were conducted in cooperation with Tampere, Helsinki and Lappeenranta Universities of Technology, University of Oulu, the Geological Survey of Finland and several foreign universities. Research funding has been obtained from the Finnish Funding Agency for Technology and Innovation. Permit issues

Talvivaara’s environmental and water permit issued on 29 March 2007 became final and binding through a resolution by the Supreme Administrative Court (“SAC”) of Finland published on 24 November 2008.

The SAC ruling rejected all the appeals and upheld the terms of the permit issued by the Northern Finland Environmental Permitting Agency, as amended by the Appeal Court of Vaasa on 15 February 2008. The amendments to the permit introduced by the Appeal Court of Vaasa had no significant cost

consequences to Talvivaara.

Talvivaara’s application for the extension of the area covered by the existing mining license was approved by the Ministry of Employment and Economy in October 2006 and the decision was subsequently upheld by the SAC in October 2007. The land surveying and redemption proceedings regarding the extension have, however, been appealed both on the compensations awarded and on the proceedings themselves. The Ministry of